PIPELINES - EARNINGS / TCPL Q3 results - Part I
TransCanada Reports Third Quarter Results for 1998
CALGARY, Nov. 2 /CNW/ - TransCanada PipeLines Limited today announced
earnings of $143 million or $0.31 per share for the quarter ended September
30, 1998, before integration costs associated with the July 1998 merger with
NOVA Corporation. Integration costs of $8 million ($4 million after-tax, or
$0.01 per share) were incurred in the quarter. The merger has been accounted
for as a pooling of interests.
Integration costs are expected to total approximately $390 million before
income taxes and regulatory recoveries. The balance of these integration
costs are expected to be recorded in the fourth quarter of 1998.
''We are working hard to capture every benefit from the merger. These
integration costs represent the business changes necessary to realize promised
savings and capture future opportunities,'' said George Watson, TransCanada's
president and chief executive officer. ''Our financial position is solid. We
have a strong balance sheet and a seasoned, experienced management team. We
are now moving forward as a new, vibrant energy solutions company with a
bright future.''
Mr. Watson said one tradition of TransCanada would remain with the new
company -- its solid dividend record. ''On October 30, we paid the quarterly
dividend of 28 cents per share,'' he said.
TransCanada reported net income to common shares (net earnings) from
continuing operations of $430 million, for the nine months ending September
30, 1998, down 8 per cent from $467 million in the same period of 1997.
Earnings per share was $0.93 compared to $1.02 for the first nine months of
1997. Increases from TransCanada's transmission and international operations
were more than offset by a reduction in net earnings from the midstream
businesses.
Net earnings from Energy Transmission for the three-month period ending
September 30, 1998 were up $6 million to $142 million from $136 million in the
same period in 1997. For the nine-month period ending September 30, 1997, net
earnings were up $11 million to $414 million from $403 million in the same
period in 1997. The Canadian Mainline contributed $206 million for the nine
months ended September 30, 1998, compared to $191 million for the same period
last year, an increase of $15 million. The increase in net earnings from the
growth in the rate base continues to more than offset the decline in the
allowed rate of return on common equity.
Net earnings from NOVA Gas Transmission Ltd. (Alberta System) were $144
million for the first nine months of 1998, compared to $148 million for the
same period in 1997. This decrease is mainly due to a rate settlement
relating to a previous year.
TransCanada's proportionate share of net earnings from its North American
pipeline investments was $64 million for the first nine months ended September
30, 1998, comparable to the same period in 1997.
Energy Marketing had net earnings of $11 million for the three-month
period ending September 30, 1998, compared to $7 million for the same period
in 1997. Net earnings for the nine-month period ending September 30, 1998 were
$13 million, which are flat relative to the same period in 1997. Improved
results from the petroleum and products marketing business were achieved in
1998. This improvement was offset by a decline in year-to-date net earnings
from the gas marketing business, due to higher inventory levels in the
marketplace and the absence of significant weather impact on demand.
Energy Processing's net earnings for the third quarter were $6 million,
compared to $16 million for the same period in 1997. For the nine months
ended September 30, 1998, net earnings decreased to $16 million from $55
million in 1997. The U.S., and, to a lesser extent, the Canadian gas
gathering and processing businesses have suffered from increasing natural gas
prices combined with declining product prices, which have created very narrow
margins. Net earnings of these operations continue to be negatively impacted
by these unfavourable market conditions, which began late in the first quarter
of 1997.
International posted profits again in the third quarter of 1998. For the
quarter ended September 30, 1998, net earnings were $10 million compared to a
net loss of $5 million in 1997. Net earnings for the nine-month period ended
September 30, 1998 were $17 million, compared to break even for the same
period in 1997. The increase in net earnings is primarily attributable to
higher equity income from TransCanada's investments in Colombia and Argentina
-- Oleducto Central S.A. (OCENSA), Gasoducto GasAndes S.A. (GasAndes) and
Transportadora de Gas del Norte S.A. (TGN) -- as well as earnings from
TransCanada International (Netherlands) Inc. (formerly Occidental Netherlands
Inc.), which was acquired in July 1998.
''The merger and current global financial conditions demand that we
examine some parts of our business,'' said Mr. Watson. ''I assure you that
TransCanada is intent on delivering shareholder value, designing cost
effective energy solutions for our customers, and providing safe, reliable and
economical energy to consumers. I believe we have the vision, the focus, and
the resources to do just that.''
TransCanada is a leading North American energy services company with
businesses in transmission, marketing and processing. The company, through
its Cdn$25 billion asset base, provides high value-added energy service
solutions to the North American and international marketplace. Common shares
trade under the symbol TRP, primarily on the Toronto, Montréal and New York
stock exchanges.
Visit TransCanada's website at: transcanada.com
TRANSCANADA PIPELINES LIMITED
1998 Third Quarter Report to Shareholders
PRESIDENT'S MESSAGE
This is the new TransCanada's first report to shareholders. Since the
merger was approved on July 2, 1998, our new management team has been working
diligently to further the vision for the merged company's future, and the
strategy to make that vision a reality. Our mission is to be one of the
pre-eminent providers of high value-added, integrated energy solutions on a
worldwide basis.
We are ready to carry out this mission. TransCanada's financial position
is strong and it has a seasoned, experienced management team. We have a solid
balance sheet. Our securities are welcome in North American capital markets.
Since the merger, we have raised more than $1.6 billion. On October 30, we
paid the first dividend of 28 cents under the new TransCanada banner. We
intend to continue TransCanada's enviable dividend history.
Several years ago, we recognized the new competitive dynamic reshaping
our industry. In response, we developed market-based energy marketing and
processing businesses. We did this not only to tap greater returns from
non-regulated businesses, but also to bring into the organization skills that
were critical to effectively operate our pipeline and other businesses in a
more competitive environment.
In the three months since the merger became effective, we have confirmed
several key areas that will provide the opportunity for continued success and
profitability for TransCanada.
- Optimize the Western Canadian Sedimentary Basin (WCSB): We will do this
by providing a range of value-added transmission, marketing and
processing services to our customers.
- Integrate all our businesses to the extent possible within their
respective codes of conduct: By doing this, we can get the most value
from our assets and know-how by providing customers optimum energy
solutions throughout North America and internationally.
- Successfully manage commercial risk: TransCanada will win in a
liberalized energy marketplace, by delivering efficient, cost effective
service to our customers while bringing value to our shareholders.
We are making progress on these fronts. We are taking a lead role in
optimizing the WCSB. In April 1998, TransCanada entered into an industry
accord to promote a competitive environment, greater customer choice and
alignment of interest in the WCSB. We have taken a huge step forward in
implementing this accord with a framework that should lead to industry
consensus on a new pricing structure and settlement proposal for gas
transportation tolls on the Alberta System. This transforms the restrictive
way in which services within the Alberta System were priced. We look forward
to the process of gaining support from others in the industry and presenting
this important change to regulators later this year. This should ultimately
make our customers more competitive and us more competitive with new pipeline
systems.
We are working hard to ensure the new TransCanada captures every possible
benefit from the merger. We are on target to realize $100 million in savings
from increased operating efficiencies by the year 2000.
This isn't an easy time for anyone in the energy business. Financial
markets are turbulent and developing economies in Asia, Russia and South
America have encountered problems. This has decreased worldwide demand for
energy; as a result, oil prices are at their lowest level in more than a
decade. These conditions, plus the merger, demand that we examine our business
to deliver the value you expect and deserve.
We are expert at what we do, whether transporting, marketing or
processing energy at home and abroad. We take innovative approaches to
address customer needs. We are diversified, with strong positions in natural
gas liquids, petroleum products and electricity. We are positioned to deliver
shareholder value, design cost effective energy solutions for our customers,
and provide safe, reliable and economical energy to consumers.
True, these are difficult times but it is during times such as these that
great companies are created. I believe we have the vision, the focus, the
team and the resources to do just that. We will continue to keep you informed
of our progress.
George W. Watson
President and Chief Executive Officer
October 30, 1998
Calgary, Alberta
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